Types of Collaterals and Their Characteristics

is the fall-back asset a banker takes alongside (or in lieu of) the primary security so that, if the borrower defaults, recovery is not left to the mercy of unsecured civil litigation.

Document: All material documents of title (Sale Deed / Gift Deed / Partition Deed / Conveyance Deed); Why It Is Called For: To establish ownership in the mortgagor

Document: Parent documents for the prescribed period — many banks insist on a 30-year chain; Why It Is Called For: To trace flow of title and rule out defective transfer in the chain

Document: Non-Encumbrance Certificate (NEC) — normally for 13 years; Why It Is Called For: To verify no subsisting charge / lien on the property

Document: Tax receipts (municipal / property tax); Why It Is Called For: Proves continuous possession by the proposed mortgagor

Document: If the property is in the name of a minor, permission of the competent court to encumber; Why It Is Called For: A minor's property cannot be mortgaged without court sanction (Sec. 8, Hindu Minority & Guardianship Act, 1956)

Document: Search report at RoC, if the property belongs to a joint-stock company; Why It Is Called For: To ascertain whether any prior charge subsists under Sec. 77 of the Companies Act, 2013

Document: Legal opinion from the panel advocate on clear, good and marketable title; Why It Is Called For: The bank's first-line legal due-diligence